Basement Apartments - Lets Talk
So many people are looking for a home with basement apartment but there are drawbacks. It is extra income.
Let's look at a little history and recent events in the Toronto (GTA), Brampton and Mississauga.
In 1994, the NDP attempted to legalize basement apartments and other accessory residential uses. Four years later, thousands of units still don't meet the necessary standards to be legal.
In determining what is a legal basement apartment in Ontario today, confusion reigns supreme.
For years basement apartments proliferated, despite being illegal in most areas. Fire officials were concerned about residents' safety, since many units were viewed as firetraps.
Rather than clamp down on their existence, the NDP opted to legalize them. A series of tragic fires in early 1994 strengthened the government's resolve to legalize basement apartments and impose fire safety standards. The new law on apartments in houses took effect on July 14, 1994.
Many people thought all existing basement apartments were suddenly legalized. Not so. Though poorly publicized owners had two years (until July 14, 1996) to comply with the retrofit provisions of the Fire Code, discussed below.
While apartments in homes were now allowed, they also had to satisfy the Fire Code to be fully legal. Unless both conditions - permitted use and compliance with the fire code - were met, a basement apartment would be illegal come July 14, 1996.
June 1995. New government, new philosophy. On Nov. 16, 1995, the Tory government voiced its displeasure with the NDP law by introducing legislation to repeal it (on May 22, 1996, it became law).
One problem. Basement apartments had become a permitted use in July, 1994. Banning them would strip homeowners of that status. So the Tories had to grandfather (or preserve) those two-unit houses made a permitted use by the NDP, and which were used or occupied that way on the magic date of Nov. 16, 1995.
The Ministry of Municipal Affairs and Housing's Apartments in Houses Guide Update interprets the expression used or occupied very broadly, to mean houses where the physical structure consisted of two residential units on the magic date.
The presence of the second unit on Nov. 16, 1995 means that the house will always be permitted to have two units - even if one or both units were vacant on the magic date, or in the future.
Establishing that a basement apartment was a permitted use as of the magic date is only half the battle. Even a grandfather home containing two existing dwelling units had to comply with the Fire Code on July 14, 1996! In other words, even though basement apartments may be permitted in terms of zoning, they also must fully comply with the Fire Code to be 100 per cent legal today.
What are those four fire safety standards? Fire separation between dwelling units; means of escape; fire alarms and detection; and safe electrical wiring. The penalty for non-compliance with these very technical standards is steep: a fine of up to $25,000, up to a year in jail, or both. Homeowners could also face a civil action (with possible denial of insurance coverage) if a tenant dies or is seriously injured in a fire in a basement apartment that violated the Fire Code.
Two separate inspections and clearance certificates are needed to 'legalize' basement apartments, from the local fire department and Ontario Hydro. Preliminary inspections must often be conducted, to indicate the work needed to upgrade the property, followed by final inspections. The more extensive the deficiencies, the more likely a building permit will be needed.
Should I build a Basement Apartment?
What is a basement apartment?
Basement apartment, or a second suite, is a self-contained unit (rental or rent-free) in a single-detached or semi-detached house. Most second suites are basement apartments. They have also been called granny flats, in-law suites and accessory apartments.
Should I build one? This is the question that needs to be answered by any homeowner considering to finish or renovate his basement.
These are the critical factors to consider:
- Do I need it?
- Is it legal?
- Is it worth it?
If you answer positively all three questions, then you want to ask: How best to do it? and When is a best time for the project? Lets us consider each question in turn.
Do I need a basement apartment?
You need to assess your present and future space and financial needs to decide whether a basement apartment is something you would benefit from.
If you need the space for your personal use, perhaps you do not want an apartment there. However, if you intend to use the basement mainly as a guest room, it may be nice to provide a self-contained accommodation for your guests.
If you do not need the basement space for your own family's use, or for your guests, it may be financially prudent to develop the space into a source of ongoing rental income.
You should also consider the option of having the basement apartment for a few years and later converting it to your own use.
Is a basement apartment legal?
On July 6, 2000 the City of Toronto's new second suites bylaw (493-2000) came into effect. The bylaw permits second suites in all single-detached and semi-detached houses throughout the City with certain significant conditions. For more information, please check references at the end of this article.
Most municipalities outside of City of Toronto do not allow basement apartments. Many basement apartments are not legal, or not conforming to legal requirements, but still exist. You need to consider your own risk tolerance and consequences if the municipality would force you to give up the rental income and asses penalties for breaking the law.
The best way to find out if your existing or planned basement apartment is legal, is to ask your municipality's Urban Planning and Development Services Department.
Is a basement apartment worth it?
Financially, few investments can give you better rate of return than building your basement apartment and renting it. For example, if you spend $20,000 building the apartment and rent it for $700 per month ($8400 per year) you achieve 42% return on your investment. If you keep renting it for 10 years, you get more than four times your money back.
You must declare this income and pay tax on it, but you can also deduct a portion of all your house expenses from your total income (such as heat, water, property tax, interest you pay on your mortgage, repairs and other expenses). You should speak to your tax advisor about maximizing your benefit. Some homeowners may be able to deduct from their taxes more than they receive in rental income and get a tax refund, in addition to the income they derive from the apartment.
Is the hassle and emotional cost of rental basement apartment justified? Only you can answer this question. There definitely are some hassles associated with renting your basement. These include:
- living with a stranger in your home
- having to look for a new tenant from time to time
- dealing with rent collection and tenant and landlord issues.
How best to do it?
If after reading this article, and the references we present, you choose to build or upgrade your basement apartment, it is advisable to do it correctly, in a competent way.
Before you get started, you or your contractor must contact your district Building staff as all new second suites require building permits and must meet Ontario Building Code requirements, zoning bylaws and other laws that may apply. For more information please visit building permit pages. This paragraph references City of Toronto information. If you live in other municipality, you need to contact the appropriate office at your City Hall.
Real Estate Agent Convicted with Illegal Basement Apartment
BRAMPTON – A Brampton real estate agent has been convicted of operating an illegal basement apartment.
Real estate agent Brian Wilding was convicted in Provincial Offences Court on Jan. 31 of illegal use of lands. He was fined $25,000 and issued a prohibition order. This is the maximum penalty for this offence.
On Feb. 15, 2006 Enforcement & By-Law Services received a complaint that a Brampton home on Edenborough Drive had been modified to contain three apartments, a main apartment and two illegal basement apartments. The illegal basement apartment came to light after it was discovered for sale on Multiple Listing Service (MLS).
This is the second time Wilding has been convicted of operating an illegal basement apartment. Wilding was convicted on Feb. 18, 2004 on the same charge and for failing to register a two-unit house. He was fined $200 and $400 respectively. These charges were associated with the same residential address.
“This conviction is a victory for the City of Brampton,” said Matt Holland, Director of Enforcement and By-Law Services. “Council’s efforts to eliminate illegal basement apartments are starting to have an impact. We will continue to work with the Brampton Real Estate Board (BREB) and the Real Estate Council of Ontario (RECO) to deal with this problem.”
The Fire Code regulates fire safety in homes including the requirements for dividing walls, exits, smoke alarms and electrical safety. “Basement apartments that do not satisfy the provisions of the Fire Code may be a fire safety hazard and tenants lives could be put at risk,” said Fire Chief Terry Irwin.
Mississauga Basement Apartment Policy
Can I have a new basement apartment in my house?
Answer ; No, a new basement apartment (or second dewelling unit) is not permitted. An application to legalize an existing basement apartment can be made in some instances. Please contact By-Law Enforcement at 905-896-5655 for further information.
From the Landlord and Tenant Tribunal we have a variety of horror storys. My favorite.....
Tenant running water in the basement to curtail ambiant noise in the home and consumed in excess of $3,000 in water. [Water was included in the rental] Landlord consistantly entered the residence to turn off the water. That makes sense, but it's trespass of the Tenant's private space without consent. Ultimately the Landlord was evicted from their own home because of the restraining order obtained by the tenant.
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